Peabody bids for mine

Company reaches tentative agreement to purchase Twentymile

The largest coal mine in Routt County is on the verge of being acquired by the parent company of another, smaller mine.

Peabody Energy announced Monday that it has reached a tentative purchase agreement with the German owner of Twentymile Coal Company west of Steamboat Springs. The amount of the purchase is being withheld until sale contracts are produced next year.

The transaction isn't scheduled to be concluded until sometime in the first six months of 2004. If the sale were to close, it would mean that Peabody, the owner of Seneca Coal Company, also in Routt County, would have acquired full control of the larger mine.

Together, the two mines employ more than 400 people.

Ron Spangler of Twentymile Coal Company said Peabody officials have sent a written statement to the mine's 365 employees outlining the company's philosophies and approach to doing business. However, he said he was not free to go into details.

The two mines collaborated this year when Seneca found itself unable to meet the full amount of its monthly contract to supply coal to Hayden Station. Twentymile trucked coal to the power plant to make up the shortfall.

Twentymile and Seneca mine what is essentially the same "wedge" of coal. However, surface miners at Seneca must dig deeper and deeper to reach the coal.

The situation has led to some speculation that Peabody is acquiring Twentymile to gain access to its underground mining equipment. That would allow it to negotiate the long-term contract the power plant seeks.

Routt County Commissioner Dan Ellison said the coal industry helps to diversify the area's economy by providing career jobs that aren't dependent upon tourism. And the dollars returned to the local economy from mineral severance taxes help governments and school districts.

"What the coal mines provide is an opportunity for a good paying job with benefits that will last a career, and in some cases more than one generation," Ellison said. "The energy impact grants that come from severance taxes helped the Hayden School District remove asbestos, and they're helping with the (plastic surface for) the ski jump in Steamboat."

Peabody is the world's largest private sector coal company with 2002 sales of 198 million tons of coal and $2.7 billion in revenues. It is purchasing Twentymile from Ruhrkohle AG (commonly referred to as RAG) along with the German company's 25 percent interest in northern Venezuela's Paso Diablo surface mine.

Combined, the new mines would boost Peabody's output about 9.25 million tons, or more than 5 percent of last year's total.

Twentymile was acquired by RAG from Denver-based Cyprus Amax after the former owner announced in 1998 it intended to sell off its $1 billion coal division so it could focus on hard-rock mining.

Twentymile produces 7.5 million tons of low sulfur coal each year from its underground longwall operation.

Seneca, which is engaged in surface mining, employs up to 90 people and produces about 1.9 million tons a year. Seneca is the primary supplier of coal to the Hayden Station Power Plant.

There is a notable difference in the employment situation at the two mines -- Seneca coal Company's miners are members of the United Mine Workers of America. Twentymile miners are not union workers.

Both Seneca and Twentymile have earned recognition for efficient operations. Seneca received awards for its reclamation efforts from the State of Colorado and the U.S. department of the Interior in 2000 and again in 2001.

Twentymile has been recognized for its safety record and its high productivity.

Seneca mine manager Greg Kitchen was unavailable for comment Monday. Attempts to reach Bill Kleckler, president of United Mine Workers Local 1385 were unsuccessful.

"We're going to continue to focus on doing our job the very best way we can," Spangler said.